Is Bribery 'Business As Usual' South Of Border?

Now, we turn to a business scandal that could have repercussions on both sides of the U.S.-Mexico border. Wal-Mart, America's biggest retailer, is also Mexico's largest retailer and there, the company has been accused of paying more than $24 million in bribes to Mexican officials to obtain construction permits to build new stores.

The New York Times broke that story this weekend. If true, these actions could mean Wal-Mart violated the Foreign Corrupt Practices Act here in the U.S. That law makes it illegal for companies to pay bribes to foreign government officials and political figures and, this week, Wal-Mart has also been accused of participating in a lobbying campaign to soften that law.

The U.S. Justice Department is probing this question and, on Wednesday, Mexican officials announced that they'll be opening an investigation of their own.

Now, there's been a lot of discussion about what this could mean for Wal-Mart in the U.S., but we were wondering what all this means for Wal-Mart's business and reputation in Mexico, so we've called upon Ana Maria Salazar. She is the host of Imagen News in Mexico City and she's reported extensively on business issues on both sides of the border.

Ana Maria, thanks so much for joining us once again.

ANA MARIA SALAZAR: Hi, Michel. Greetings. Greetings from Mexico City.

MARTIN: We think of bribery as, you know, you're giving officials compensation to which they are not entitled to do what they're supposed to do anyway or you're paying them to do something that they should not do, i.e., allow people to build someplace that they shouldn't build and so forth. That's what we're talking about. Correct?

SALAZAR: Well, yeah. We're talking about cash going into envelopes and you have someone who takes these envelopes to mayors and kind of low level public officials in local offices to be able to get permits. And I have to say it is very difficult to do business in Mexico, so what you do is you hire these people. They call them (foreign language spoken) and you're supposed to facilitate - that's kind of the word, you know - facilitate you getting these permissions or doing any type of administrative work that you need to get from, like, local offices and so...

MARTIN: But let me ask you this, Ana Maria. Is this behavior illegal in Mexico, number one, and is it widespread in Mexico, even if it is illegal?

SALAZAR: It is widespread. It is illegal and, in fairness to Wal-Mart - because I would never think that I would be defending Wal-Mart - but, in fairness to Wal-Mart, you know, in order to get any administrative permit done, you literally have to go through these (foreign language spoken). There's really no other way.

The question is, did they know that these (foreign language spoken) were providing this money that they should not be giving to the local mayors or to these bureaucrats? And, apparently, Wal-Mart did know. I mean, it was kind of like a systematic practice to give them this money. It's kind of mind boggling when you think that a company can hide $24 million in bribes and you would think that someone would be able to catch that a little bit sooner.

MARTIN: Let me ask you this, Ana Maria, because you said something interesting. You said that you never thought you'd be defending Wal-Mart. Now, in this country, there is a kind of a love-hate relationship with Wal-Mart. On the one hand, people appreciate the diversity of products. They appreciate...

SALAZAR: Right.

MARTIN: ...the low prices. They appreciate the service. On the other hand, in a lot of communities, people hate them. I mean, small businesses feel that they drive out, you know, family-owned businesses, that they keep wages low.

SALAZAR: Yeah.

MARTIN: I just wanted to ask. In Mexico, is it the same thing?

SALAZAR: Yeah. It's the same. You know, now that I'm a mom, I love Wal-Mart. I mean, they just - it's probably one of the best places to go get, like, baby stuff and baby clothes, but at the same time, there's been a lot of questions about Wal-Mart's practices. It has closed down, you know, mom and pop stores and as this scandal has been developing, for example, one of the main newspapers here in Mexico City, El Universal, kind of outlined that Wal-Mart had received from the federal government more than 2,000 contracts.

And one of these contracts had to do - well, more than a contract. It was a permission to eliminate some - part of the jungle in one of the southern parts of Mexico in the state of Quintana Roo. They were given a permission to - instead of protecting this area, they were allowed to change the local permit that prohibits building there and they were able to put a Wal-Mart.

As this scandal's been developing in Mexico and a lot of questions as to how harsh the Mexican government is going to investigate Wal-Mart, you know, you're starting to find out that Wal-Mart, you know, is all over the place. And there's just kind of this question mark whether they're going to be able to prosecute them, considering how powerful they are.

MARTIN: Well, but let me ask you this, though. Would a defense be that this is the way business is done in Mexico? To use a colloquialism here, don't hate the player. Hate the game. That they couldn't compete effectively if they didn't engage in these practices. Is that a defense?

SALAZAR: And that - I mean, they are - many argue that. You know, I talked to a couple of businessmen last night, kind of saying, come on, this is a scandal. And, you know, they told me two things. You know, it is so difficult to avoid not paying off at least some government official as you're trying to move through these bureaucracies. But the other thing they said, which I thought was very interesting, if Wal-Mart, with all its power and its presence, has to do that, then everybody has to do that. You know what I mean?

You know, any major in Mexico or government official would want Wal-Mart to open a store in their jurisdiction because it provides a lot of jobs.

MARTIN: As we mentioned, the Mexican federal comptrollers office announced that they will open an investigation.

SALAZAR: Right.

MARTIN: This was announced on Wednesday.

SALAZAR: Right.

MARTIN: What's the scope of their authority? How serious is that?

SALAZAR: Well, that's one of the different agencies that should be investigating this. They need to have - they also need to have the attorney general's office to be looking into this and she's kind of sitting back. Probably the ministry of finance needs to be looking into this because of the taxes. I mean, you know, $24 million - what happened? You know, someone had to be paying taxes on all of this or should have been.

So I do believe that they're going to be opening up investigations. Part of the problem is we're right in the middle of the electoral process, so I think this is going to get lost in the elections chaos and it really will be up to the next president, whomever he or she is, to really push an investigation and sanctions on this.

MARTIN: Ana Maria Salazar is the host of Imagen News in Mexico City and she's reported on business issues on both sides of the border. She was kind enough to join us by phone from Mexico City.